Home loan hunters should compare fees and charges

15/12/2014 18:07

Consumers who intend to get a home loan are urged to ‘look around and compare’ fees and charges, interest rates and other costs associated with home loan before signing up one.

The Council’s home loan survey conducted on August – November 2014 found a plethora of fees and charges that can make the application process expensive to consumers.

Consumers are urged to compare the fees and charges imposed by the banks as these can increase the total cost of borrowing. Apart from the fees and charges, there are other costs that are likely to be incurred by the consumer.

Banks charge a fee for the establishment of a new home loan account. However, the terminology used can be confusing. Three terms are used: establishment fee, loan approval fee, and facility approval fee.

Housing Authority uses the term loan application fee. For a $200,000 home loan scenario, the establishment fees ranged from $75 (HA) to $2,000 (ANZ, Baroda, HFC, BSP). Only Westpac offers a flat establishment fee of $650; with the other banks the level of the fee depends on the loan amount.

Bank of Baroda charges a security document handling fee of $60 for the handling and keeping of documents in the safe custody of the bank. HFC charges $450 as security documentation fee for handling of all legal paper work during the loan processing.

Westpac and Bank of Baroda also charge a mandatory inspection fee on the property that the customer is seeking a loan for. Westpac charges $80 per inspection, while for Baroda inspection fees will depend on the loan amount and it is applicable every year. For BSP this fee is subjective and the bank is left to determine if an inspection fee is needed.

Bank of Baroda is the only institution that charges $17 as Data Bureau search fee.

For FNPF Housing Transfer- ANZ, BRED, BSP HFC and Westpac charges $100 whereas Bank of Baroda charges $50. Housing Authority does not charge consumers for using their FNPF as equity contribution.

Housing Authority provides in-house legal services where they charge $160 each for mortgage preparation and transfer and it charges $210 to prepare Sales and Purchase Agreement.

The Council found that the total initial cost of a home loan amongst the banks surveyed ranged from $600 to $1,930 for a $100,000 loan and $830 to $2,930 for a $200,000 loan.

Consumers need to be mindful of all fees and charges and any other costs imposed by the different banks in the country. While obtaining a home loan is anything but easy, consumers have a tough role to play in ascertaining which financial institution to turn to when intending to take up a home loan.